Father Time Offers a Reprieve

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With the benefit of hindsight, the stock market sure looks like an easy place to quickly amass a fortune. If we could turn back the hands of time, going all-in long on LULU at $4.33 per share (now trading at $115.62) in early March of 2009 was the “easy and obvious thing to do, duh!” While it may be fun to look back at all of the ignoramuses alive in the 1960’s who missed a chance to invest in Berkshire Hathaway when the shares were as cheap as Warren Buffett’s favorite restaurant, doing so is usually an exercise in futility. With the amount of issues that trade each day Wall Street is open for business, there will always be too many missed opportunities to count, regardless of the investing legend and regardless of how many assets under management.

Although we cannot turn back the clock, Father Time occasionally offers a reprieve. In the case of Genco Shipping and Trading, Limited, you are talking about the quintessential “value trap” for quarters on end. Back in late January, I wrote this piece when the stock was at $13.29, giving a bearish thesis based on a weekly descending triangle breakdown. Since then, Genco has been one of the few stocks to not only retest its 2008 crash lows, but also marginally breach them. The stock currently trades at $7.57, after going as low as $6.28. So, if you have been beating yourself up for not getting long back in late 2008/early 2009, here is another chance.

Of course, you may curious as to whether it is actually correct to turn bullish on Genco down here. The value guys will tell you that the stock is insanely cheap down here, and they are correct in an academic sense. Unfortunately, Mr. Market not only frequently ignores academics, he also punishes them harshly from time to time. As you can see, a cheap stock can become much, much cheaper when the prevailing trend is down.

Turning to the technicals, the weekly chart shows a slow and steady drip down for well over a year now. Those small-bodied candles indicate the bears’ staying power of a driving rain, making it that much more difficult to play for any type of sharp upside reversal. In fact, traders who tried to do as much likely threw in the towel, thus perpetuating the drip lower. That said, the daily chart shows more progress being made by the bulls in at least eight months. Note how price climbed back over the 50 day moving average, and is now attempting to consolidate on it. While the 20 day moving average is smoothing out, the rest of the reference points are still declining, meaning that the bulls have their work cut out for them to develop a pattern of higher lows and higher highs.

Finally, and this is where Father Time may actually be proffering a rare gift that should be treasured, GNK has phenomenal seasonality in the month of July, batting 100%, or up six out of six times, according to the proprietary algorithm inside The PPT service here at iBankCoin. Moreover, the stock yields an average return of nearly 13% in July.

In other words, if Genco truly is cheap and has no business being anywhere close to its crash lows, then now is the time for those bullish convictions to come to fruition.

Seasonality

Month Avg % Return Total # Months # Months UP # Months DOWN January -6.08 6 2 (33.33%) 4 (66.67%) February 3.179 6 5 (83.33%) 1 (16.67%) March -0.761 6 4 (66.67%) 2 (33.33%) April 12.691 6 5 (83.33%) 1 (16.67%) May 4.661 6 4 (66.67%) 2 (33.33%) June -6.5 6 2 (33.33%) 4 (66.67%) July 12.978 6 6 (100%) 0 (0%) August -2.335 6 3 (50%) 3 (50%) September -3.437 6 4 (66.67%) 2 (33.33%) October -5.301 6 3 (50%) 3 (50%) November -8.48 6 2 (33.33%) 4 (66.67%) December 10.159 6 3 (50%) 3 (50%)

 

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